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SXC Health Solutions Corp. (SXCI)

Q1 2010 Earnings Call

May 6, 2010 8:30 a.m. ET


Mark Thierer - President and CEO

Jeff Park - EVP and CFO


Glenn Garmont - ThinkEquity

Tom Liston - Versant Partners

David MacDonald - SunTrust

Michael Baker - Raymond James

Charles Rhyee - Oppenheimer

Paul Steep - Scotia Capital

Amanda Murphy - William Blair

Constantine Davides - JMP

Tony Perkins - First Analysis

Michael Minchak - JPMorgan

Larry Marsh - Barclays Capital

Brooks O'Neil - Dougherty

Blair Abernethy - Thomas Weisel Partners



Good morning. My name is Andrea, and I'll be your conference operator today. At this time, I would like everyone to the SXC Health Solutions Corporation first quarter results conference call. (Operator Instructions)

With this I'll remind you that portions of today's discussions may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.

For more information on the company's risks and uncertainties related to these forward-looking statements, please refer to SXC's annual 10-K report. I would like to remind everyone that this call is being recorded on Thursday May 6, 2010 at 8.30 a.m. Eastern Time.

I would now like to turn the conference over to Mr. Mark Thierer, President and Chief Executive Officer. Please go ahead, sir.

Mark Thierer

Well, thank you and good morning everyone. Thank you for joining us on today's call.

This morning, we issued our 2010 first quarter financial results by press release, and a copy of those results are available on our website. Today with me is Jeff Park, our EVP and our CFO. So I'll summarize the key events of the quarter, and then Jeff will review our financial results for Q1 and update our guidance for the balance of 2010.

I'll then close with a few comments, and we'll open it up for Q&A.

Well, we've started 2010 on a great position and with a clear focus to execute on our growth strategy. We're tracking against our growth plan in four core areas; first, winning new business; second, retaining our existing business; third, cross-selling services within our existing client base; and finally, driving cost containment and responsible expense management throughout our business.

In terms of winning new business, we implemented a number of new accounts on January 1, most notably, Spectral Solutions a $50 million health plan in Florida. The implementation of all our note counts went very smoothly. As part of our go live process, we always conduct a formal post implementation satisfaction survey. And the feedback and scores we receive from our clients were extremely positive. This speaks to how well our team can execute on new business.

Our detailed client knowledge, combined with the flexibility of our technology has earned SXC a reputation for implementing complex plans flawlessly. Our ability to deliver in this manner was a primary reason for winning a five year contract with Health Spring during the first quarter. Health Spring is one of the largest Medicare Advantage and Medicare Part D health plans in the United States, offering healthcare coverage across six states to nearly 500,000 Medicare beneficiaries.

Specifically, it was our domain expertise and our experience with Medicare Part D, combined with the flexibility of our programs that were the critical components that led Health Spring's decision to select SXC.

Well, we're under way right now with the implementation process for this account and in fact, have begun filling biotech prescriptions just last week for the early start of the specialty pharmacy services. The full plan as you know begins in January, 2011 and we continue to move along on schedule.

In addition to HealthSpring, for 2011, we also have a strong a pipeline of new opportunities that we are currently pursuing. As we enter the RFP season, our pipeline of new opportunities includes targets across each of our five target markets. The markets with particularly strong activity at this stage are the large managed care and health plans based and the small to mid-size employer market.

In addition, we continue to focus on building and expanding our relationships with the consultant community. These relationships along with the direct relationships we're building with perspective clients, have contributed significantly to the growth in our pipeline. In order to grow the business with these new opportunities we must first retain our existing client base and make certain that they're happy.

We've been very aggressive in proactively renewing our entire book of business. The contract renewal of Boston Medical Center is a great example of our ability to retain key accounts. DMC as you know manages more than 250,000 members with an annual drug spend of $150 million.

Our full-service customized program met their goals of improved outcomes in cost management. The five-year contract with BMC offers flexible service within a competitive pricing structure. Now with BMC renewal in place, I'm pleased to reiterate that we have no material renewal risk for the remainder of 2010.

Our retention goal is larger in just this calendar year. In an order to extend the remarkable growth that we've seen over the past 24 months, we've implemented a formal process within SXC that focuses on client retention and satisfaction. As part of this company initiative, we have rebuilt our internal measurement and reward systems around customer satisfaction and retention.

This internal focus to drive higher retention and higher client and member satisfaction has the additional benefit of driving excellent customer references. Building a strong and positive network of client references in turn will help fuel the top-line growth for our company.

We are continually working to understand our customers at all levels of their organization. It's this understanding and it begins with our account management and engages the entire organization in planning and developing relevant solutions. This level of expertise in our highly consultative approach drives our HCIT to PBM conversion success, as well as our other cross-selling opportunities.

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